Key Takeaways:

  • Megaphone pattern is a pattern that consists of minimum of higher highs and two lower lows.
  • The pattern is generally formed when the market is highly volatile in nature and traders are not confident about the market direction.
  • Megaphone pattern is known to give multiple trading opportunities to the trader.
  • This pattern also can be traded when it fails but is necessary to identify the failure perfectly.
  • Sometimes only pattern is not enough to take best trading decisions you may need multiple indicators to identify better entry and exit points

Do you know what traders deal ?
What precisely do they look for in the charts ?
The answer is Pattern .
A technical analyst who is will to trade will constantly search for a model in the graph. In this article, we will discuss trade with megaphone patterns.

But why ?
basically, a trading traffic pattern is one of the easiest ways to trade because they will constantly have certain entry and exit points. What we have to do is equitable identify the practice absolutely. In this topic, we are going to discuss a convention which is about 85 years old and first mentioned by Richard Schabacker ’ second 1932 book : “ Technical Analysis and Stock Market Profits, ”. The blueprint which looks like a megaphone is seen in a swerve market .
There are respective nicknames for this model like Broadening wedge and Inverted Symmetric triangle. But in this topic, we will name it as the Megaphone convention .

What is Megaphone Pattern?

A megaphone design is a design that consists of a minimum of two higher highs and two lower lows. The practice is generally formed when the commercialize is highly fickle in nature and traders are not convinced about the market direction. normally this traffic pattern is visible when the market is at its top or bottom. The greater the time human body is better the convention will work. however, traders love this convention when it is formed in a daily or weekly time frame .
To get a better theme of unlike aspects of technical psychoanalysis you may do : NSE Academy Certified Technical analysis
Have a look at this photograph. These are the idle Megaphone Pattern .
Example of Megaphone Pattern

How to identify the Megaphone pattern?

broadly, the Megaphone Pattern consists of 5 different swings. But the swing has to have a minimal of two higher highs and two lower lows. A course line is drawn by connecting luff 1 and point 3 while points 2 and 4 are besides joined together to draw a line .
These two lines create a form that looks like a megaphone or inverted symmetrical triangle. These swings ’ highs and lows have to close above or below its pivot argumentation and therefore they will create swing high as pivot high ( R1, R2, and R3 ) and swing lows as pivot lows ( S1, S2, and S3 ) .
A break occurs when the credit line does not respect its digest or resistance cable and closes outside the shape after making the 5th swing .
bullish & bearish pattern

Characteristics of Megaphone trading pattern:

Below are a few characteristics of the Megaphone trade practice :


bulk plays an important character when it comes to the recognition of this traffic pattern .
In the Megaphone Top, bulk normally peaks along with prices .
An addition in the volume, on the day of the traffic pattern confirmation, is a strong indicator .

Underlying Behavior:

When the pattern is forming it represents that the bulls and bears are fighting to build master of the lineage .
The design takes target when the bulls take the prices higher .
At the clock time of formation of the Megaphone Top, then again, bears make the prices fall because of which lower lows are formed .
however, the bears ultimately triumph .

Price Targets:

The target price refers to the potential price move that this blueprint shows .
You can think about if the target price for this blueprint is enough to supply an appropriate rejoinder after your costs ( such as commissions ) have been taken into history.

An ideal rule of thumb is that the target monetary value should be greater than 5 %, however, you should consider the existing price if the trade is going in your privilege .

Theoretical ways to trade the Megaphone pattern:

Megaphone practice is known to give multiple trade opportunities to the trader .
A trader can trade Megaphone pattern as

  • Breakout Trades
  • Swings trades (while making higher highs and lower lows)
  • When the Price fails to give a breakout.

 factors of Megaphone pattern

Breakout Trades:

When the price breaks the tendency line after making the 5th swing and closes outside the convention, a break is confirmed. break may happen in a positivist or a veto focus. Depending upon the market condition and the put of the model in the graph, bullish and bearish breakouts happen .
Example of Continuation pattern This is the chart of July 2016 Sensex. As we can see the market was in a potent uptrend. From the beginning of June, the pattern started taking supreme headquarters allied powers europe and finishes in one calendar month. The swerve remains in an up direction after the price breaks the amphetamine line of the radiation pattern ( decimal point phone number 5 ) .
After a prolong taurus run, when this radiation pattern is formed at the top and the price closes below its lower vogue line, then it acts as a vogue reversion form .
But, if the price closes above the higher drift line and makes new higher highs in the chart then it will be termed as a Continuation Pattern. Traders can take a trade when the price closes outside the blueprint ( in whichever direction ) to get the best possible confirmation of the break .

Swing trades:

Though this is a geometric radiation pattern, it has a tendency to respect Fibonacci levels. Respecting and maintaining Fibonacci levels without respecting Pivot lines is not possible. So it is obvious that this model will have a sealed line which will be its pivot line and consequently resistance and defend lines will besides be there in that practice .

besides, read Fibonacci and Stock Market Analysis

For long trades, RI and R2 may act as a probable underground while S1 and S2 may act as a probable back for a short-change position .
In case of breakouts finding the target is a morsel catchy. Because it is about impossible to find out the perfect exit. But there is a way to make an exit. Generally, traders calculate the distance between two drift lines from the point it breaks and books partial derivative or fully net income when the price reaches 60 % of that Redline ( top or downside ) as shown in the calculate .
pattern TargetBearish pattern This is the Daily chart of Jet Airways. After a downtrend Megaphone pattern forms. The green pipeline ( 1 ) indicates the length of the opening of the Resistance and support wrinkle. Line phone number 2 is the about 60 % of that col line ( 1 ), where we can book our profit .


This model besides can be traded when it fails but is necessity to identify the failure absolutely. now how to spot the bankruptcy ?
pattern targets A bankruptcy can be spotted when it fails to break the tendency line ( upper or lower as the case may be ) after completing the 5th swing .
Suppose in a bullshit market condition, this pattern is formed and if it fails to break the upper swerve note, traders go short when the price goes below 3rd swing high ( R2 ) .
exchangeable is the scenario, when the market is in a bear phase and it fails to break the lower drift line ( S2 ), traders take a long position when the price closes above the 3rd swing high .
pattern failure here is the chart of TCS we can see that every time monetary value is respecting its supports zone and beautifully follows the vogue course. When the price is ineffective to break its resistor line ( Upper line connected by points 1, 3, and 5 ) after the 5th swing, a short-change position can be added below the black line as shown in the design .
Patterns are easy to trade. But finding the traffic pattern from the chart and identifying it by rights is the main art of trade .
sometimes the only pattern is not enough to take the best trade decisions you may need multiple indicators to identify better entrance and exit points.

You can besides use technical scans to filter out stocks for trading the future day by using StockEdge App, now besides available in the web translation .
Did you find this model useful ? Tell us by commenting below .
Happy Learning!

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